Refinancing plans boost AES shares

ARLINGTON, Va. (CBS.MW) -- Shares of AES Corp. rose as much as 19 percent Friday after the power company said it plans to launch a refinancing, including a private offering of $1 billion of new senior secured notes that will help it pay off debt.

Shares rose as high as $4.75 before closing at $4.70, up 70 cents.

AES
AES, -0.59%
said the refinancing will also help fund a cash tender offer to acquire a portion of its outstanding senior and subordinated notes. It will also aid the company in amending and paying down $475 million of an outstanding loan under its senior bank facility.

"The tender offer is more likely than not to be positive to AES shareholders," said Lasan Johong, an analyst at Blaylock and Partners.

The main benefit is that debt due in November 2004 will be virtually eliminated -- meaning that the debt due in 2005 would be reduced to approximately $1.3 billion from $2.1 billion, Johong explained.

Also, about $218 million of some maturities due in 2006 and 2007 will be pushed out to at least 2010, and more likely 2013, he said.

"This greatly enhances the company's financial flexibility and therefore dramatically further reduces any kind of bankruptcy risk for the stock," Johong said.

On Wednesday, AES said bondholders have allowed it to amend the terms of around $4.1 billion in debt. The terms now include provisions in the event of default.

AES is one of a number of power companies that made debt-restructuring announcements this week. See Due Diligence.

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